The Corporate Transparency Act (CTA) is a federal law designed to enhance transparency in business ownership to combat money laundering and other illicit financial activities. Starting on January 1, 2024, the CTA mandates that both domestic and foreign businesses operating in the United States report detailed information about their business and its owners to the Financial Crimes Enforcement Network (FinCEN). Failure to comply with this new law carries a penalty of up to $500 per day, up to $10,000 per entity.
While we are still determining the extent of services that we can provide, we want you to be aware of this reporting requirement. This is NOT a tax reporting requirement – it applies to all business entities regardless of tax structure.
Who is Required to Report Under the CTA?
All businesses created or registered to conduct business with a secretary of state or a similar office must file unless they meet specific exceptions. These exceptions apply primarily to large businesses or businesses already disclosing similar information due to other federal or state regulations. Unfortunately, smaller businesses are unlikely to qualify for an exception.
When and Where to File the Report?
Starting January 1, 2024, FinCEN will accept reports electronically through its new secure website. Existing businesses must register before January 1, 2025. New businesses started in 2024 have 90 days after formation to register. All businesses, once registered, must update any change to their information within 30 days.
Information to Report
All businesses must report their full legal name, trade name (if applicable), principal place of business address, jurisdiction of formation, and taxpayer identification number. Additionally, businesses must report personal information from their beneficial owners—individuals with “substantial control” or holding a 25% or greater ownership interest. The personal information required is the full legal name, date of birth, residential address, and a unique identifying number from an acceptable identification document, including an image of this document. Businesses formed in 2024 or later must also report personal information from their company applicants.
Beneficial owners can personally apply for a “FinCEN identifier” by providing their information directly to FinCEN. Individuals can provide this unique identifying number to businesses as an alternative to providing their personal information.
What Should You Do Now?
Because this is a new reporting requirement and the reporting portal is not yet open, it is unclear how or whether we or other third-party service providers can assist you. Assisted reporting options may emerge over the first half of 2024 as the FinCEN works with business and their professionals. For now, you can prepare yourself for reporting by:
- Further familiarize yourself with the CTA by visiting the FinCEN website. FinCEN has numerous resources to help you navigate your reporting requirements.
- Begin conversations with your attorney to determine how CTA applies to you.
- If you are an individual who owns a business or multiple businesses subject to the reporting requirements, consider applying for a FinCEN identifier starting in January. This can help limit the extent to which your personal information must be shared.
- Begin to gather the information needed for reporting.
- Assess your ability to report directly through the FinCEN portal once it opens, as this will be the most cost-effective and fastest option for meeting your obligations under the CTA.
We will keep you updated as we learn more about these new reporting requirements over the upcoming months and whether we or other providers could assist you with your reporting obligation.